On October 24, 2013, debt held by the public was approximately $12.122 trillion or about 72.8% of Q2 2013 GDP. Intergovernmental holdings stood at $4.9 trillion (29%), giving a combined total public debt of $17.078 trillion. As of January 2013, $5 trillion or approximately 47% of the debt held by the public was owned by foreign investors, the largest of which were the People's Republic of China and Japan at just over $1.1 trillion each.Japan and China each hold over a trillion in our debt. If you can, picture some large building in each country that holds the notes of debt. That is literally what Joe Six Pack envisions when he read the above quote.
How about if we look at it in a different perspective. We spent a lot of money buying cell phones and other goodies in those countries, and the people we bought it from are coming over here and are buying real estate. So let’s do some back of the envelope math. Figure that we bought two trillion dollars of product made over there. And that everyone in China and Japan that made 10 million dollars wants to buy a home in California. If I’ve done the math right, that’s about 200,000 homes. But if we want a bottom limit, we need to figure the number of homes that could be bought if the Japanese or Chinese entrepreneur only had one million dollars, and we get 2 million homes. So we end up with a range of homes purchased, for cash from 200 thousand to two million. The thing you need to realize, is that the money we spent and can’t pay back to China and Japan,--and we are laughing about it--, has already been safely salted away (they bought US property).
Where is the bottom line? Who gets the last laugh? And the real question, who pays the piper for all of the future inflation from the tremendous cash infusion? Of course, I have to wonder, how our two trillion dollar debt with them, doesn’t drop a tad when everyone from the Orient buys a home in California?
Do you get the feeling that there is a lot of economic information out there that is very insignificant until it suddenly becomes significant? The Federal Reserve balance sheet from financing home loans comes to mind. It’s a little like selling invisible gold fish, nobody complains until they understand that they have been had.
Of course, there is a saying in California, “You can check in, but you can’t check out.” It could be true, I haven’t tried to move since coming here.
I'm waiting for Obama Tax Insurance--you get to keep more for earning more! Why does that seem so absurd?